TOKYO  -  Massive overseas and domes­tic investments offer Japan a chance to reclaim its tech crown, but to become a con­vincing alternative to China the country must embrace rapid innovation, experts say.

US tech giants are pumping billions of dollars into artifi­cial intelligence, cybersecurity and chip production in Japan, which dominated the hardware industry in the 1980s.

Google launched a regional cyber defence hub in the coun­try last month, and Amazon Web Services is spending $14 billion to expand Japanese cloud infrastructure. And in the latest move, this week saw Microsoft, a partner of ChatG­PT-maker OpenAI, pledge $2.9 billion to boost the nation’s AI prowess. “Geopolitical ten­sions have made Japan a more attractive and stable partner compared to China,” said Khos-Erdene Baatarkhuu, CEO of fin­tech company AND Global.

“Japan’s tech sector, once a leader, lost ground due to a slower response to digital and mobile trends” compared with neighbours such as South Ko­rea, he told the news agency.

But “now, with supportive government policies, resilient start-ups, and a potentially shifting global tech scene, Japan has an opportunity to regain its tech edge”. It’s not there yet, however. Japan was ranked a lowly 32nd in the lat­est global classification of dig­ital competitiveness by Swiss management school IMD. And only seven Japanese firms ap­pear among more than 1,200 tech “unicorns” -- start-ups worth more than $1 billion -- listed by CB Insights. A “per­fection-seeking approach” and preference for “stabil­ity and gradual improvement” among businesses is partly to blame, Khos-Erdene said. “The traditional corporate culture in Japan tends to be risk-averse and hierarchical, which can stifle the rapid in­novation typically seen in the software industry.”

MICROCHIP ‘REVIVAL’ 

Masayoshi Son, CEO of Japa­nese tech investment vehicle SoftBank Group, has warned the country could be left a gaw­ping “goldfish” if it ignores AI.

“Wake up Japan!” he said at a corporate event in October. “I want to be on the side of evo­lution.” Son and tech titans in­cluding Apple boss Tim Cook and Amazon founder Jeff Bezos joined Japan’s Prime Minister Fumio Kishida and US Presi­dent Joe Biden at a Washington dinner on Wednesday.

At a summit that day, Kishi­da and Biden had vowed to strengthen “our shared role as global leaders in the de­velopment and protection of next-generation critical and emerging technologies”. They also agreed to work with “like-minded countries to strengthen global semi­conductor supply chains” in a joint statement. Semiconduc­tors, which power everything from mobile phones to cars, have become a key battle­ground in recent years.

The United States and some European countries have blocked exports of high-tech chip technology to China over fears of military use. Mean­while, Taiwanese chip behe­moth TSMC is facing pressure to diversify its production from customers and governments worried about the possibility of China invading Taiwan.

TSMC opened a new $8.6 bil­lion chip factory in southern Japan in February, and is plan­ning a second, $20-billion facil­ity for more advanced chips.

On a visit to the TSMC plant this month, Kishida said he “felt first-hand the revival of our country’s semiconductor industry”. Japan has spent 3.9 trillion yen ($25 billion) in the past three years on chip-relat­ed subsidies -- a larger portion of gross domestic product than the United States or Germany.

Japanese firms including Sony and Toyota are also col­laborating with US giant IBM on a semiconductor project called Rapidus, aiming to mass-produce two-nanometre logic chips in Japan from 2027.

‘CROSSROADS’ 

“This is a great time to invest in Japan” with the yen’s value at a 34-year low, said Hideaki Yokota, vice president of the specialist IT think-tank MM Re­search Institute.

Tech firms hope the country can become their “best partner in Asia” while its workforce boasts many highly educated engineers ready to be snapped up, he told the news agency.

Established Japanese busi­nesses, especially in the auto and household appliance sec­tors, provide real-world op­portunities to make AI profit­able, he said.

But Khos-Erdene warned that Japan should not rely on its legacy as a manufacturer, given its low labour productiv­ity and shrinking workforce.

“As CEO of a tech company, I see Japan at a crossroads,” he said, with the question not if but how quickly the country can become a “producer, not just a consumer, of these trans­formative technologies”.

Microsoft plans to offer AI training to three million of Ja­pan’s population of 125 mil­lion. Japanese and American universities are also teaming up on new technology research programmes funded by global companies such as Nvidia and Arm. “Overall, Japan’s commit­ment to AI holds tremendous potential for economic revitali­sation,” Khos-Erdene said.

“By fostering collaboration, retaining top talent, and learn­ing from successful models like the US and China, Japan can bridge the AI gap and re-estab­lish itself as a major force in the global tech landscape.”